The Truth About Marissa Mayer's M&A Plans

Yahoo has a lot of cash, and everyone is writing that Yahoo CEO Marissa Mayer is going to spend it soon.

But what's actually going on?

Yahoo has approximately $2 billion in cash and securities it can easily sell, and another $600 million or so coming in from the sale of a portion of its Asian assets. It could quickly get its hands on a couple billion more if it was willing to sell some of its stake in Yahoo Japan for cheap.

Another source in the ad scene literally called us to say "Blue Horseshoe likes Criteo" — a reference to a scene from the movie "Wall Street"where a banker calls a reporter to tip him off about a coming acquisition.

So what's actually going on?

Yahoo is likely to buy something in the ad-tech space. Mayer chose not to sell Yahoo's ad-tech business. She plans to invest in it. There are going to be purchases, a source tells us. "Will there be big deals? Yes. Will they be crazy prices? No."

For now, though Mayer is just doing homework. A senior executive at one of the the many companies listed above told us that yes, his company has talked to Yahoo about what it does and how it fits into the competitive landscape. But this source described the conversations not as negotiations, but as part of Mayer's effort to better understand the ad-tech world she wants Yahoo to dominate. Mayer may have worked at Google, but she was never involved in the advertising side of its business, so this is all very new to her and she knows she needs an education. This source wasn't ignorant to the fact that these kinds of conversations can lead to acquisitions, however.

Mayer isn't going to rush anything. Mayer only hired someone to run Yahoo's advertising business last week; new COO Henrique De Castro. And because of visa issues, he can't start for a month. Nothing is happening too soon.

People are pumping the value of their companies. "[Criteo president] Greg Coleman is telling everyone he talks to that he met with Marissa," says a source close to Yahoo. "She and Coleman have not met four times," says this source, debunking one rumor we'd heard.

The OpenTable idea is laughable — literally. Late yesterday, a source familiar with Yahoo's plans called us to say that Reuters' story on Mayer wanting to buy OpenTable "won the prize for most hilarious thing written all weekend." So yeah, that deal seems unlikely.

Yahoo could be a "buyer of last resort." In the past couple years, a number of fast-growing tech companies — including Demand Media, Pandora, Groupon, and Zynga — hit the public markets at huge valuations only to see those valuations corrected to much lower levels today. There are some late-stage private companies in a similar position; LivingSocial is not worth as much as it once was. Spotify and AppNexus face challenges too. Among this handful of companies, there are a few good businesses that were simply overvalued by late-stage private investors. A source tells us part of Mayer's plan is to have Yahoo in a position where it could scoop up one or two of them at reasonable prices. Imagine Yahoo buying Zynga for a couple hundred million dollars, for example. Says this source: "Yahoo could be buyer of last resort. A lot of the businesses are going to come by."

Correction: An earlier version of this story said Reuters reported that Yahoo had begun low-level negotations with OpenTable. Reuters actually reported taht Yahoo had begun low-level negotiations with Caterva. Sorry for the mistake.